An IRS Form 1099 is an informational return. In other words, it is a form that is used to provide information to the Internal Revenue Service and to you, the taxpayer. You will use the information from the 1099 to fill out your tax return, and the IRS will use the information from the 1099 to review your tax return. There are numerous kinds of 1099 forms, each one of which is used to report a specific type of information.
The 1099-MISC provides information about miscellaneous income earned during the year. For example, if you do work as an independent contractor, you should receive a 1099-MISC from the company for which you worked. A 1099-MISC must be filed anytime you earn more than $600 as an independent contractor.
The 1099-INT reports interest income. For example, if you have an investment account, savings account, or stock brokerage account, your financial institution should send you a 1099-INT to inform you and the IRS how much interest income you earned on your account.
The 1099-S is used to report the details of real estate transactions. For example, if you sell your home using a broker, the broker should send you a 1099-S explaining your receipts from the transaction.
The 1099-C reports canceled debt. For example, if you owe $10,000 to your credit card company but the company settles that debt with you by canceling $4,000 in exchange for a $6,000 lump sum payment, you will have to report that $4,000 as income.
The 1099-DIV reports dividend income. You will get one if you own stock in a corporation that issues quarterly dividends.
If you have a retirement or pension plan and you withdraw money from that plan, you have to pay income tax on the withdrawn money. Your financial institution should send you a 1099-R to report your total withdrawals from the account.
Using the 1099
The purpose of the 1099 is to provide you and the IRS with information necessary to properly calculate your tax liability. So, when you prepare your tax return, you need to be sure you transfer all of the information from your various 1099s to your tax return.
Read More: How to Dispute an Erroneous IRS 1099 Form
The Constitution Guru has worked as a writer and editor for "BYU Law Review" and "BYU Journal of Public Law." He is an experienced attorney with a law degree and a B.A. degree in history with an emphasis on U.S. Constitutional history, both earned at Brigham Young University.